Manage Your Credit, Not Your Credit Score

Ray’s Take You must have a great credit score to do anything these days, or so the lending industry would like for us to believe. Increase your score! Buy more stuff on credit!

It is important to have a good credit score, but not in the obsessive way that we are led to believe. When you give your credit score more importance than it actually holds, you can easily lose sight of much more important priorities like your ultimate financial independence by obtaining more and more credit to increase your credit score. It can be a vicious cycle.

There are only a few times in your life when your credit score will truly matter and if you have managed your credit, then you will not have any problems.

The two most financed items are an automobile and the real biggie – a home. So, how often do you buy these two items? Certainly not every year. And my advice regarding an automobile would be if you have to borrow money to buy it, you need to be looking at a less expensive car!

So, since your credit score only truly matters when you are going to make these large purchases, why obsess over what it is from day to day or year to year? Certainly you should be careful about using credit cards. Don’t have a wallet full of them. Pay the full balance monthly on the ones you do carry.

Credit is just a nicer way of saying debt. But debt score – or how much do you owe – doesn’t sound quite so attractive. Does it?

Dana’s Take It’s so easy to look at the people around us and see them driving the great new car or wearing the latest designer clothes and think “Wow. They must have it all.” We all want to have the nice things in life, and it’s hard to make that decision not to buy something on credit now that will need to be replaced by the newest “in” thing next week or next month.

What if we had special glasses where things purchased with debt or credit cards showed up as red and those paid in full showed up as green? We would see a lot of red cars, houses and outfits. Folks with a positive net worth would show up in shades of green and those in debt would be blushing.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.